GST on Director Salary

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This discussion clarifies whether GST applies to director salaries paid by private limited companies. Generally, GST is applicable under the Reverse Charge Mechanism (RCM) when a director is considered a supplier of services rather than an employee. However, there's a debate, with some experts suggesting that services provided as part of employment might be exempt, and the applicability may need further review.

sanjay

sanjay (Querist)

14 May 2020 Sir
I want to know the procedure of GST on Director's Salary payable by Private Limited Co. Is it liable?
Pl advise.
Regards
Sanjay

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

14 May 2020 Yes liable and payable under reverse charge.

KAVIRAJA ADDANGADI

KAVIRAJA ADDANGADI (Expert)

14 May 2020 Yes RCM applicable on director salary

c.bakshi

c.bakshi (Expert)

15 May 2020 If the director is non executive, then payment made to him liable to reverse charge mechanism. RCM provision not applicable on executive, MD and WTD

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KAVIRAJA ADDANGADI

KAVIRAJA ADDANGADI (Expert)

15 May 2020 Remuneration paid to directors to attract GST: AAR In an application filed before the Rajasthan bench of the AAR, Clay Craft India Pvt Ltd had sought clarification on whether salaries paid to directors would attract Goods and Services Tax. The company said its directors are working as employees Companies will have to pay GST on the remuneration they role out to directors, the Authority for Advance Ruling (AAR) has said. In an application filed before the Rajasthan bench of the AAR, Clay Craft India Pvt Ltd had sought clarification on whether salaries paid to directors would attract Goods and Services Tax. The company said its directors are working as employees for which they are being compensated by way of a regular salary and other allowances. "The company is deducting TDS on their salary and PF laws are also applicable to their service. Therefore, in all practical purposes these directors are the employees of the company and are working as such besides being Director of the company," it said. In its ruling, the AAR said, "the consideration paid to the directors by the applicant company will attract GST under reverse charge mechanism..." The AAR, while analysing the case, said that Director is the supplier of services and the applicant of the company is the recipient of the services. It said that the Central Tax (Rate) notification clearly states that services supplied by a Director of a company will be considered as supply and hence directors cannot be called an employee. "So it is very clear that the services rendered by the Director to the company for which consideration is paid to them in any head is liable to pay GST under RCM (Reverse Charge Mechanism)," the AAR order said

c.bakshi

c.bakshi (Expert)

15 May 2020 https://youtu.be/rPmVjh0v0a0
Just go through it.
It's advance ruling what is shared by mr kaviraja... Check negitive list of GST on which GST is not applicable. Many experts including CS CA Bimla Jain are of view that this needs to be checked again. As services which are part of employment or under the terms of employment are exempted for GST liability. Rest it's upto a person.

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